Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China - Ricerca sull'intelligenza artificiale specializzata al MIT

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China
Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Tham Siew Yean
Institute of Malaysian and
International Studies
Universiti Kebangsaan Malaysia
43600 Bangi, Selangor, Malaysia
tham.siewyean@gmail.com

Andrew Kam Jia Yi
Institute of Malaysian and
International Studies
Universiti Kebangsaan Malaysia
43600 Bangi, Selangor, Malaysia
andrew@ukm.edu.my,
cchizz@yahoo.com

Re-examining the Impact of ACFTA on
ASEAN’s Exports of Manufactured
Goods to China*

Astratto
There is a relatively large body of literature examining ASEAN–
China relations, including assessments of the impact of the
ASEAN–China Free Trade Agreement (ACFTA) on ASEAN’s wel-
fare and its trade with China. Overall, the results of these studies
indicate a positive impact of ACFTA on the region’s exports to
China. These results differ from firm-level surveys that indicate a
low utilization rate of most regional trade agreement tariff con-
cessions, including those provided by ACFTA. Inoltre, trade
in manufactured goods in the region has been characterized as
market-led, and governed by multinationals (MNCs) and their re-
gional production networks. Così, MNC decisions are the driving
force influencing changes in manufactured parts and components
trade in the region. This trade is also fostered by duty-free im-
ports in the export enclaves provided by the host economies for
these MNCs. In view of the conflicting empirical evidence on the
trade effects of regional trade agreements, the objective of this
study is to re-assess the impact of ACFTA on ASEAN’s manufac-
tured exports to China. In performing this analysis, we separately
evaluate the effects of trade in parts and components (P&C) E
non–parts and components (non P&C) or final manufactured
goods. When we apply gravity estimation methods to individual
regressions for these two forms of trade, we find that the deter-
minants of trade are indeed different for the two sectors, and that
the implementation of ACFTA had different effects on P&C ver-
sus final goods ASEAN exports to China.

1. introduzione

Since the early 1990s the international fragmentation of pro-
duction has dramatically transformed trade patterns in East

* Revised version of a paper presented at the Asian Economic

Panel Meeting at Universiti Sains Malaysia, 19–20 March 2013,
in Penang. The authors acknowledge the comments of

Asian Economic Papers 13:3

Institute of Technology

doi:10.1162/ASEP_a_00292

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Asia, including the ºows of trade between China and the countries of ASEAN-61
(Athukorala 2011). In particular, the integration of China into international produc-
tion networks has increased parts and components (P&C) trade in the region.
Although these production networks are driven by the operations of the region’s
multinational corporations (MNCs) (Narjoko 2011), the proliferation of free trade
agreements (FTAs) in the region, especially since 2000 (Kawai and Wignaraja 2009),
may have also contributed to the growth in the region’s trade. Study of the ASEAN–
China FTA’s (ACFTA) contribution to trade is particularly relevant in light of the rel-
atively high share of ASEAN and China in East Asia’s P&C trade (Athukorala 2011)
and the fact that this FTA, which was signed in 2002, represented China’s ªrst foray
into FTAs and ASEAN’s ªrst extra-regional agreement. By 1 Gennaio 2010, Questo
agreement had brought tariffs down to zero for around 7,000 items traded between
ASEAN-6 and China through its scheduled 5-year tariff reduction for goods.

The literature on ASEAN–China trade, ACFTA, and its impact can be divided into
three groups. The ªrst group examines the competitive and complementary aspects
in ASEAN and China’s trade relations. Per esempio, Wong and Chan (2002), Holst
and Weiss (2004), and Tongzon (2005) ªnd that China’s competitiveness in manufac-
turing has a negative effect on ASEAN’s exports, both between members as well as
in major developing country markets. The second group uses computable general
equilibrium models such as the Global Trade and Economic Analysis or the Global
Trade Analysis Project to examine the impact of the ACFTA on member country
trade and welfare (Vedere, per esempio., Chirathivat 2002; Lee and van der Mensbrugghe 2007;
Park, Park, and Estrada 2009). This work ªnds positive net welfare and trade gains
for both ASEAN and China. A speciªc case study for Vietnam also yielded a similar
result, indicating that ACFTA had a positive effect on Vietnam’s GDP and exports
(Toh and Gayathri 2004). The third strand of the literature uses gravity models (Rob-
erts 2004; Yamashita and Kohpaiboon 2011; Sheng, Tang, and Xu 2012) to measure
the effects of tariff reductions on trade creation. In particular, Sheng, Tang, and Xu
(2012) extend this literature to capture the effects of tariffs on components trade
through the use of an extended gravity model. Their results show that ACFTA led to
an increase in the level of bilateral trade between ASEAN countries and China. In
contrasto, Yamashita and Kohpaiboon (2011) discount the need to estimate the impact
of the ACFTA on P&C trade due to low or zero Most Favored Nation (MFN) rates
for these goods and consequently a low margin of preference. For this reason, Quando
they estimate the impact of the ACFTA on China’s exports of ªnal goods, their work

the discussants and participants at the meeting, which were used in revising the paper. IL
usual caveats hold.

1 This comprises Brunei, Indonesia, Malaysia, the Philippines, Thailand, and Singapore.

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

ªnds that the FTA had a positive though small impact on the trade links between
China and ASEAN.

Whereas a number of studies ªnd positive effects associated with ACFTA, the key
ªndings in UNESCAP (2011) come to a very different conclusion. That work, Quale
only uncovers a tenuous link between international production networks and re-
gional trade agreements (RTAs), argues that there are a number of factors that re-
duce the potency of FTAs. Primo, because countries in the region seek to attract
MNCs to produce in their location, many countries in the region have already en-
gaged in unilateral tariff liberalization over time, which has been accompanied by
special provisions for MNCs such as duty-free imports in export processing zones
(Narjoko 2011). As noted by Hiratsuka et al. (2009), many ASEAN member states
provide investment incentives or tariff reductions on imported materials and parts
as part of their strategy to attract inºows of foreign direct investment (FDI). Due to
the general liberalization in these cases, ªrms have much less incentive to utilize
FTAs. Secondo, when ªrms choose to access the additional tariff beneªts that are pro-
vided by RTAs they must also comply with the rules of origin (ROOs) stipulated by
these agreements. As the degree of product fragmentation increases, Tuttavia, it be-
comes increasingly difªcult for ªrms to comply with the ROOs, especially within a
single country. Così, when ªrms decide whether to use tariff preferences that are
provided by RTAs, they need to weigh these compliance costs against the tariff
beneªts they will achieve. This tariff liberalization beneªt, or the margin of prefer-
ence (MOP), reºects the difference in tariff concessions that are given by the RTA
with the MFN rates of the respective countries. Naturally, a small MOP reduces the
incentives for a ªrm to utilize the tariff concessions provided by the RTAs. For ex-
ample, Wang and Tong (2010) reported that a recent study on the effectiveness of
ACFTA in China found that only one-fourth of China’s enterprises involved in trade
with ASEAN utilized ACFTA’s preferential tariff rates. This is due in part to the
high compliance costs relative to the small MOP beneªts. The low utilization rates
were also attributed to the ªrms’ low awareness of the tariff concessions of the
agreement. Third, in the case of electronics products such as hard drives, tariffs are
already zero in accordance with the Information and Technology Agreement (ITA)
under the World Trade Organization (WTO). In sum, for these reasons, it is not
surprising that Athukorala and Yamashita (2006) do not ªnd evidence that FTAs can
promote vertical specialization and fragmentation trade in East Asia. These con-
trasting conclusions in this area of research suggest the value of examining the ef-
fects of FTAs on ªnal goods and P&C trade separately.

In view of the ongoing debate, the objective of this paper is to re-examine the impact
of ACFTA on ASEAN’s exports to China in P&C and ªnal manufactured products.

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Along the way, we will (1) analyze the trade trends for each of these types of goods
between the years 1999 A 2011, by (2) calculating the MOP for P&C and ªnal goods
under ACFTA and (3) testing the impact of tariff liberalization generated by the
ACFTA on ASEAN’s exports of P&C and ªnal goods to China. For reasons of data
availability, the ASEAN member states examined in this paper are the ASEAN-5,
namely, Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

2. Overview of ACFTA and ASEAN’s exports to China

2.1 ACFTA: Salient features
The Framework Agreement on Comprehensive Economic Cooperation between
ASEAN and China was signed during the seventh ASEAN–China Summit in
Phnom Penh in November 2002 (Appendix 1). This agreement included three com-
ponents that covered goods, services, and investment. The focus of this paper is in
the Trade in Goods Agreement that was put into force in 2005. The elimination of
tariffs in this agreement is progressive over time, based on several tracks, namely,
Early Harvest Programs (EHPs), normal track, and sensitive track.

The EHP provided accelerated tariff reduction for selected agricultural and manu-
facturing products,2 starting on 1 Gennaio 2004 and ending in 2006 for members of
the ASEAN-6, and ending in 2010 for the newer ASEAN member states, namely,
Cambodia, Laos, Vietnam, and Myanmar.

In the case of normal track products, the phase-in of tariff reductions for the
ASEAN-6 and China are shown in Table 1. Based on the scheduled tariff changes,
the ASEAN-6 and China were required to eliminate their tariffs on the majority of
products that were classiªed as part of the normal track by 2010, and tariffs on all
remaining items were to be eliminated by 2012. Firms that wanted to gain access to
ACFTA rates were required to comply with the ROO requirement of the agreement,
which was set at 40 percent regional value content.

Although the FTA required the removal of all tariffs on the vast majority of prod-
ucts, a small number of products were included in the sensitive track. Inclusion in

2 Although the EHP consisted of products mainly in chapters 1–8 in the Harmonized System
of Tariffs, it was negotiated on a bilateral basis between China and the individual ASEAN
member states. Hence member states could request that certain products be exempted from
the program’s coverage under the Exclusion List. Conversely, there was also a request list
for the inclusion of certain products not covered by the program but mutually agreed upon
by China and the respective ASEAN member states (Yeoh and Ooi 2007). Malaysia, for ex-
ample, has included some manufactured products in its EHP with China.

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Tavolo 1. Tariff reduction phase-in, for ASEAN-6 and China

X Applied MFN tariff rate
X ≥ 20 per cento
15 percent ≤ X ≤ 20 per cento
10 percent ≤ X ≤ 15 per cento
X ≤ 5 per cento
Schedule
Luglio 2005
Gennaio 2007
Gennaio 2010

2012

Fonte: MITI, undated.

ACFTA preferential tariff rate (not later than 1 Gennaio)

2005

2007

2009

2010

5
5
5
0

12
8
8

20
15
10
Standstill
Commitments
At least 40 percent of its tariff lines reduced to 0–5 percent
At least 60 percent of its tariff lines reduced to 0–5 percent
Eliminate all tariffs in normal track, except for items provided with
ºexibility
All tariffs in normal track eliminated

0
0
0
0

this special track was limited to a maximum of 400 HS6-digit products, and an
aggregate trade value that was not allowed to exceed 10 percent of import value,
based on 2001 trade statistics (UACT undated). This track was subdivided further
into a sensitive list and highly sensitive list. The ASEAN-6 and China committed
to reduce applied MFN tariff rates on tariff lines placed in their respective sensitive
lists by 20 percent by 1 Gennaio 2012, to be followed by an ultimate reduction to
0–5 percent implanted no later than 1 Gennaio 2018. An example of products placed
on the sensitive list includes automobiles, including parts and components
(Narjoko 2011).

2.2 Profile of ASEAN’s exports to China
In 2011, China was the top trading partner of ASEAN, following intra-ASEAN
trade. Its 2011 share in ASEAN trade of 11.7 percent represented a dramatic increase
in its importance, with a rise from its earlier levels of 2 percent in 1993 E 7 per cento
In 2003. Allo stesso modo, China became an important destination for ASEAN’s exports, ris-
ing from 2 percent in 1993 A 6 percent in 2003 and to 11 percent in 2010. Inoltre,
over this interval the share of China’s imports sourced from ASEAN rose from
2 percent in 1993 A 12 percent in 2010.

Following Athukorala (2010)’s deªnition of P&C goods, the share of P&C goods in
total ASEAN-5 exports to China increased progressively from 33 percent in 1999 A
48 percent in 2006 before falling to 41 percent in 2010 (Figura 1). Some of the prod-
ucts included in this P&C trade were covered by the ITA that was signed in 1996.
Signatories to the ITA include some members of the WTO, including the ASEAN-5
and later China upon its 2001 WTO entry. To meet its ITA obligations, China
eliminated tariffs on two-thirds of the products subject to the ITA by 1 Gennaio 2003,
and eliminated tariffs on all other ITA products by 1 Gennaio 2005. The WTO-ITA

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Figura 1. Share of P&C (non-P&C exports) to total trade with China

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Fonte: Authors’ calculations based on UNComtrade data.

covers products such as telecommunications equipment, computer software, hard-
ware and peripherals, semiconductors and electronic components, ofªce machines,
semiconductor testing and manufacturing equipment, and analytical instruments.
As such, many electrical machinery and machinery items under HS Chapters 84 E
85, as well as some under HS Chapter 90 (cioè., optical and related equipment), were
already zero-rated for trade among ITA members, including the ASEAN-6 and
China before the implementation of the ACFTA. Consequently, the share of exports
of ITA products to total ASEAN-5’s exports to China increased progressively from
25.5 percent in 1999 A 44 percent in 2005, before falling to 29 percent in 2011 (Figura
2). The share of ITA goods in P&C exports from ASEAN-5 to China increased from
29 percent in 1999 A 53 percent in 2005, before reaching 57 percent in 2011. This im-
plies slightly more than half of ASEAN’s P&C exports to China were already zero-
rated due to commitments under the WTO-ITA agreement before the implementa-
tion of the ACFTA.

Firms that seek to gain preferential tariffs are required to meet a regional value con-
tent of 40 per cento. For this reason, exporters generally weigh the cost of compliance
against the difference between the MFN tariff rate and the preferential tariff rate or
the margin of preference before they decide to make the effort required for the pref-
erential tariff. Hiratsuka et al. (2009) found that a trigger value of 5.3 percent is
needed for Japanese companies operating in ASEAN before they elected to use tariff

Asian Economic Papers

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Figura 2. Export of P&C goods in ITA as a share of total ASEAN and total ASEAN’s P&C
export to China

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Fonte: Authors’ calculations based on UNComtrade data.

preferences offered by a FTA. In other words, the MOP had to exceed 5.3 percent be-
fore a Japanese ªrm in ASEAN considered incurring the additional cost of proce-
dures involved in accessing the preferential tariffs of the agreement. To determine
whether the ACFTA provided economically interesting tariff incentives, we calculate
the share of goods with a MOP in excess of 5 percent for P&C and ªnal goods in
ASEAN’s exports to China (Tavolo 2). Our calculation reveals that more than 50 per-
cent of the P&C and ªnal goods had a MOP of over 5 percent in 2009 A 2010, Quale
coincided with the last two years in the implementation of the ACFTA. Based on the
relatively large share of ITA goods in the ASEAN-6’s exports to China, Tuttavia, COME
well as the relatively small MOP (cioè., less than 5 per cento) prior to 2009, we conjec-
ture that the reduction in tariffs under the ACFTA was of limited importance for
parts and components exports as compared to ªnal goods exports to China between
1999–2011. We test this conjecture in the following section.

3. Model, dati, and empirical results

3.1 Augmented gravity model
We use two models to examine and compare the impact of ACFTA on the exports
of P&C and ªnal manufactured goods from the ASEAN-5 to China. Each model
is based on the basic gravity model of bilateral trade, which posits that trade is

Asian Economic Papers

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Tavolo 2. Share of goods above 5 percent MOP in total P&C and ªnal goods (per cento)

MOP

5 per cento

P&C
Final

(percent of total P&C or ªnal goods)

2003

0
0

2005

0
0

2007

32
27

2009

64
80

2010

79
91

Fonte: Computed by authors, based on World Bank World Integrated Trade Solution data and data from ACFTA.

positively determined by the economic mass of the trading partner(S) but adversely
affected by the distance that separates them (Tinbergen 1962; Anderson 1979).
Theoretical justiªcations for the gravity model are provided by Linnemann (1966)
and Deardorff (1998). The general speciªcation of an augmented gravity model con-
sists of additional exploratory variables that explain distance attributes and other
variables of interest that may affect bilateral trade. Therefore, both models will in-
clude additional variables to capture speciªc differences that are relevant for P&C
and ªnal manufactured goods trade. Following this structure, the augmented grav-
ity model in this paper is speciªed as follows.

Model 1: The P&C Model

ln Xpnci,China,T
(cid:5)
4ln Distancei,China,T
(cid:4) (cid:5)
(cid:5)
9RLCt

(cid:2) (cid:3) (cid:4) (cid:5)
(cid:4) (cid:5)

(cid:4) (cid:5)
1ln GVOi,T
5Language (cid:4) (cid:5)

2ln GVOChina,T
6Crisis (cid:4) (cid:5)

10ln TariffpncChina,T
(cid:6)
3ACFTA*FDIt

(cid:4) (cid:6)

1ACFTA (cid:4) (cid:6)
4ACFTA*RLCt

(cid:4) (cid:6)

(cid:4) (cid:5)

3ExFinalChina,T

(cid:4)

(cid:4) (cid:5)

7ln Reeri,T

8ln FDIt
2ACFTA*TariffpncChina,T
(cid:4) (cid:7)

Esso . . . . . .

(cid:4)
(cid:4)

(1)

Model 2: The Final Goods (Non-P&C) Model

ln Xªni,China,T
(cid:8)

(cid:2) (cid:3) (cid:4) (cid:8)
4Language (cid:4) (cid:8)
(cid:8)
9ln TariffFinChina,T

1ln GDPcii,T
5Crisis (cid:4) (cid:8)
(cid:4) (cid:9)

2ln GDPciChina,T

(cid:4) (cid:8)
6ln REERi,ts (cid:4) (cid:8)

7ln FDIt

(cid:4) (cid:8)

3ln Distancei,China,T
8RLCt
(cid:4)

(cid:4)

(2)

2ACFTA*TariffFinChina,T

(cid:9)

3ACFTA*FDIt

4ACFTA*RLCt

(cid:4) (cid:7)

Esso . . . . . .

1ACFTA (cid:4) (cid:9)
(cid:4) (cid:9)

where subscripts i, China, and t represent the individual ASEAN-5 country and their
market destination, China in the year t. Xpnci,China,t and Xªni,China,T (rispettivamente) Di-
note the real exports of manufactured P&C goods and ªnal goods from each
ASEAN country i to China in year t.

Common proxies for economic mass are GDP, population size, and GDP per capita
(Kepaptsoglou, Karlaftis, and Tsamboulas 2010). The use of GDP as a proxy for the
demand and supply for intermediate goods has been challenged, Tuttavia, since the
supply (or demand) for parts and components is generated by its gross and not its

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

value-added output3 (Baldwin and Taglioni 2011). To address this concern, noi usiamo
the gross value of output of industries in China and the ASEAN countries to repre-
sent, rispettivamente, each country’s mass variable in Model 1. Theoretically, both (cid:5)
1
E (cid:5)
increase in output by the destination or origin country increases cross-border de-
mand and supply ºows of intermediate goods.

2 are expected to be positive. In other words, within a production network, an

Changes in ASEAN’s P&C exports to China may also be driven by increases in de-
mand by China’s export partners. Due to vertical specialization, ASEAN’s P&C ex-
ports to China may be used as intermediate goods that are assembled in China to
produce ªnal goods (Hummels, Ishii, and Yi 2001). Therefore, a mass variable to
represent China’s ªnal goods market, or third-country effects, are included in the
modello. Because third-country effects generally involve demand for China’s ªnal
goods, we proxy the third-country effects by including measures of China’s global
exports of ªnal goods. Hence, an increase in the global demand for China’s ªnal
goods exports is expected to increase ASEAN’s exports of P&C ((cid:5)
2

(cid:10) 0).

The regression used for trade in ªnal goods (Model 2) retains the standard gravity
model proxy for economic mass. GDP per capita is preferred over the standard GDP
indicator because the former represents the purchasing power or the wealth of trad-
ing countries. The purchasing power of China indicates the ability to consume im-
ported ªnal goods from ASEAN. A high GDP per capita for ASEAN also implies
more resources available to increase the scale of output to export to China. China’s
per capita income may affect ASEAN exports negatively if import substitution effect
1 is positive and (cid:8)
has occurred, Tuttavia; hence, (cid:8)

2 is ambiguous.

Although many have argued that geographical distance is increasingly irrelevant
due to advances in communications technology (Cairncross 1997), distance in our
model captures the effects of trade risks—such as difªculties in learning about for-
eign legal, administrative, customs, and business practices. The distance variable
also captures trade costs associated with time lags such as spoilage, logistics costs,
and fuel price shocks. Così, Distance is expected to have a negative effect on ex-
ports. In particular, trade in P&C may be more sensitive to trade costs compared
with trade in ªnal goods due to its nature of multiple border crossings and the abil-
ity to switch suppliers within the global production network (in absence of eco-
nomic shocks [cioè., crisis]) (Athukorala and Yamashita 2006; Pellan and Wong 2013).
Therefore, we expect coefªcient (cid:5)
4 to be negative.

3 The problem arises because GDP is measured on a value-added basis whereas trade is mea-
sured on a gross sales basis. Therefore the use of GDP is understated and the true model has
to include additional terms for intermediate goods.

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

The relationship between trade in ªnal goods and distance may be positive, how-
ever, when ªrms exporting to distant locations are more productive than those ex-
porting close to home (Melitz 2003; Chaney 2008; Lawless and Whelan 2008). As
ªxed-trade costs increase with distance, ªrms are motivated to optimize sales to
cover these costs. Hence, (cid:8)
3 is predicted to be ambiguous depending on the net
effect from the possible increase in shipment size to cover higher ªxed trade costs
and the standard negative impact of distance on exports.

To control for cultural distance (disparities) between the trading nations, the model
also includes a language indicator, Language. A priori, we predict that cultural prox-
imity such as having a common language may facilitate bilateral trade through im-
proved communication and a better understanding of the partner ªrm’s business
culture. Therefore, we expect that our estimates of (cid:5)
4 will be positive. To con-
trol for structural breaks due to economic shocks during the 1997–98 Asian ªnancial
crisis and the 2008–09 global ªnancial crisis, a crisis variable (Crisis) is included.

5 E (cid:8)

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

The gravity model is further augmented with a measure of the exporting country’s
competitiveness, the real effective exchange rate (REER).4 This variable is a
weighted average of the exporting country’s currency relative to an index or basket
of other major currencies, adjusted for the effects of inºation. A decrease in the vari-
able REER indicates that the exporter’s currency has depreciated (an appreciation in
competitiveness that may be attributed to increased productivity), which is pre-
dicted to encourage exports and discourage imports. Così, we predict that the
coefªcients (cid:5)

6 will both be negative.

7 E (cid:8)

We include FDI variables in our regressions to capture the investment-trade nexus
links that cement trade between China and the ASEAN countries. The challenging
question here is to identify the causality of trade and FDI. Although this question
has been heavily debated, there is signiªcant consensus among scholars that FDI
and trade are complementary (Helpman and Krugman 1986).5 In Blonigen (2001),
complementarity arises when FDI stimulates import of intermediate inputs.

4 The REER provides a measure of “relative price and cost.” It aims to assess a country’s

price- or cost-competitiveness relative to its principal competitors in international markets
(Randveer and Rell 2002). REER movements are generally correlated with a country’s aggre-
gate external price competitiveness and can be interpreted as changes in technology prog-
ress that leads to productivity improvement in goods commonly traded (Catão 2007).

5 In addition to literature surveys, a simple Granger-causality test has been conducted on our
variables to examine the direction of causality. We ran two general Granger tests, Y (cid:2) F
(Yt n, Xt n) and X (cid:2) F (Xt n, Yt n), using an Arellano-Bond linear dynamic panel-data esti-
mator and utilizing a Wald test on the results. Our results suggest that FDI Granger-caused
exports of P&C but had dual direction effects in the case of ªnal goods. Including FDI as an
explanatory variable is therefore acceptable.

Asian Economic Papers

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Therefore, we predict (cid:5)
imports of the goods that are assembled by FDI ªrms. In that case, (cid:8)
be negative.

8 will be greater than 0. Tuttavia, FDI may also displace

7 is expected to

MNCs often have an incentive to shift some of their production outside of their
headquarter country to reduce their cost of production by capitalizing on locational
advantages (Grunwald and Flamm 1985; Dunning 1998).6 For host countries, knowl-
edge spillovers from FDI may increase productivity, thereby increasing future trade
(Ozawa 1992; Liu et al. 2000). The signiªcance of FDI-driven exports of the ASEAN
countries has been attributed to the formation of regional production networks
(RPNs) (see Athukorala and Hill 1998; Thorbeck and Salike 2011). Therefore we pre-
dict that FDI will have a larger effect on P&C trade than the export of ªnal goods, O,
(cid:5)

(cid:10) (cid:8)

(cid:10) 0.

Following the Ricardian model of trade, relative unit labor costs (RLC)7 represent a
key relative price in the standard comparative advantage theory of trade (Edwards
and Golub 2004). If labor cost in China’s manufacturing sector increases relative to
its ASEAN partners, this improves the relative attractiveness of producing and ex-
porting manufactured goods from ASEAN countries. Although this theory was
originally applied as a description of ªnal goods trade, relative labor costs should
also apply to P&C trade, according to new theories based on the international divi-
sion of labor. In that case, wage difference provides the incentive to divide produc-
tion network tasks allocated to China and the countries of ASEAN—thus providing
opportunities for cross-border expansion of production sharing systems and the re-
lated trade in P&C (Athukorala 2008). Due to international specialization based on
relative production costs, both (cid:5)

8 are expected to be positive.

9 E (cid:8)

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

10 (O (cid:8)

9) (cid:11) 0. Tuttavia, to ascertain the impact of tariffs under the

Our variable Tariff examines the relevance of tariff barriers in determining the level
of trade. Trade theory postulates an inverse relationship between trade and tariff
barriere, (cid:5)
ACFTA, a policy dummy, ACFTA, has been created to interact with the tariff indica-
tor. A similar explanation applies to the interaction between the ACFTA policy indi-
cator and FDI. Lastly, an interaction between the ACFTA indicator and our variable
RLC is included to control for any differential impact of relative factor costs under
the ACFTA. In sum, the impact of the ACFTA on exports is explained by the change
in the responsiveness of trade to tariff liberalization, FDI, and RLC when the ACFTA

6 Another explanation characterizes FDI either as market-seeking, resource-seeking, or as
efªciency- seeking. Market- and resource-seeking FDI is considered trade diverting and
efªciency-seeking FDI is viewed as trade creating.

7 Although FDI may be inºuenced by relative costs, a correlations test conªrms that there are

no multi-collinearity issues.

Asian Economic Papers

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

is in effect. Coefªcients on the interaction terms indicate whether the effects of tariff
liberalization and FDI on trade were enhanced or diminished when ACFTA was in
effect. Appendix 2 provides a detailed discussion regarding the construction and
sources of data that were used in the estimation of equations (1) E (2).

Estimation method This study applies its estimating equations to an unbalanced
data panel covering ASEAN-5 trade between 1992 E 2011. Our use of a
Hausmann test veriªes the importance of country-speciªc ªxed effects. To estimate
these time-invariant country ªxed effects, we use a least square dummy variable
estimation model. While implementing our estimation we also accounted for
econometric issues related to the treatment of time, and the importance of hetero-
skedasticity. We use a Wald test that allows us to conªrm that there is no need for
time-ªxed effects. Further, when we study the correlation matrix, we do not uncover
any serious multi-collinearity issues between the exogenous variables. The Levin-
Lu-Chu test for a panel unit root conªrms that the variables are generally stationary.
To control for heteroskedasticity, the estimation is done using the heteroskedasticity-
robust standard error estimator.

4. Discussion

Tavolo 3 displays the estimation results. For ªnal goods, UN 1 percent increase in the
GDP per capita of ASEAN countries is found to result in an approximately 7.8 per-
cent increase in exports to China (Model 2). Tuttavia, because ASEAN’s P&C ex-
ports to China support the production of ªnal goods that are ultimately shipped to
many destinations, P&C exports will not necessarily depend on China’s GDP per ca-
pita. Consistent with this conjecture, the economic mass variables in the P&C model
are both insigniªcant in determining ASEAN’s exports to China, and the impact of
the third-country effects is positive and signiªcant in Model 1. Our results show that
UN 1 percent increase in the global demand for ªnal goods from China increases
ASEAN’s P&C exports to China by 1.4 per cento. This ªnding is generally consistent
with Athukorala and Yamashita (2006), where extra-regional trade in ªnal goods in-
creases regional production network growth based on vertical specialization.

Both models show that distance or trade cost is a signiªcant factor that inºuences
ASEAN manufactured exports to China. For P&C exports (Model 1), UN 1 per cento
increase in trade costs reduces manufactured P&C exports to China by 7 per cento. In
contrasto, the impact of trade cost is found to be signiªcant and positive for ªnal
goods exports (Model 2). The negative sign in Model 1 may be due to multiple
border-crossing in the value chain in vertical P&C trade as conjectured. In the case
of ªnal goods the net effect is found to be positive. Because ªnal goods exports to

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

China require only single entry, the positive sign may imply that the incentive of
breaking into China’s massive consumer market supersedes the trade cost factor.
Also, as explained earlier, producers may export more to optimize sales to cover
these costs (Lawless and Whelan 2008).

Although the use of a common language (Chinese) appears to facilitate trade in both
models, it may not be a good proxy for cultural proximity—as P&C trade is in the
hands of MNCs, where the common language is likely to be English. This may ex-
plain the negative sign obtained for the ªnal goods model (Model 2), as the choice of
a suitable proxy was limited. The crisis indicator shows that P&C exports are more
strongly affected by the economic crisis than were ªnal goods exports (Modelli 1
E 2). Unlike ªnal goods, where consumers have the ºexibility to substitute across
suppliers when making consumption decisions during a crisis, substitutability of
specialized components from other sources during a crisis is limited (Jones 2000;
Athukorala and Menon 2010). Because the switching of suppliers tends to incur
costs, switching decisions are not likely to be instantaneous due to contractual bind-
ings and/or ºexibility.

Before the implementation of ACFTA, Model 1 indicates that both FDI and tariff lib-
eralization were important determinants of P&C exports. The interaction term, how-
ever, shows that both tariff liberalization and FDI lost their signiªcant link as the
main drivers increasing exports of P&C following the implementation of ACFTA.
The loss of signiªcance of tariffs following the implementation of ACFTA supports
the conjecture in this paper. This ªnding also supports Yamashita and Kohpaiboon
(2011)’s assertion that FTAs may not have an actual impact on trade in components
as the relatively small MOP has decreased the importance of tariff liberalization on
P&C goods in the ACFTA.

For FDI, the ªnding of Model 1 may be attributed to sectoral barriers to manufactur-
ing investment as these form one of the major impediments to FDI in ASEAN coun-
tries (Thangevalu and Findlay 2011). Invece, differences in labor cost seem to be a
major determinant for ASEAN P&C exports to China under ACFTA.

For Model 2, we are unable to establish similar conclusions for ªnal goods in the
pre-ACFTA period. Under ACFTA, Tuttavia, tariff liberalization has signiªcant
impact on the ªnal goods sector exports. The positive interaction term between tariff
on ªnal goods and ACFTA dummy suggests that tariff liberalization under ACFTA
had a greater impact on ªnal goods. Relative labor cost also played an important
role in creating exports of ªnal goods to China, athough the relatively large
coefªcient on RLC under ACFTA for P&C exports as compared with ªnal goods

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Tavolo 3. Gravity equation estimates

Variables

lnGVOi,T

lnGVOChina,T

lnExFinalChina,T

lnDistance

Language

Crisis

lnREER

lnFDI

RLC

Tariffpnc

ACFTA

ACFTA (cid:13)
Tariffpnc

ACFTA (cid:13) lnFDI

ACFTA (cid:13) RLC

_cons

Model 1
P&C

Xpnc

(cid:12)0.0946
((cid:12)0.45)

0.292
(1.06)

1.371*
(1.55)
(cid:12)6.564***

((cid:12)16.25)

3.019***

(10.27)
(cid:12)0.335**
((cid:12)2.23)

0.356
(0.36)

1.156*
(1.94)
(cid:12)0.827
((cid:12)1.61)
(cid:12)0.0730**
((cid:12)2.47)

3.629
(0.51)
(cid:12)0.132

((cid:12)1.43)
(cid:12)0.711
((cid:12)1.13)

4.249***
(3.96)

16.55
(0.57)

Hausmann Test:
Wald-test

Prob (cid:10) (cid:14)2 (cid:2) 0.00
Prob (cid:10) F (cid:2) 0.6967

Note: io) Country dummies are included but not reported.

lnGDPcii,T

lnGDPciChina,T

lnDistance

Language

Crisis

lnREER

lnFDI

RLC

TariffFin

ACFTA

ACFTA (cid:13) TariffFin

ACFTA (cid:13) lnFDI

ACFTA (cid:13) RLC

_cons

Model 2
Final goods

Xªn

7.821***
(4.45)

0.790
(0.99)

17.01***
(4.57)
(cid:12)25.09***
((cid:12)4.88)
(cid:12)0.179
((cid:12)1.42)
(cid:12)2.776***
((cid:12)3.23)
(cid:12)0.651
((cid:12)0.98)

0.760
(1.41)

0.0258
(1.02)

7.641
(1.08)
(cid:12)0.129**

((cid:12)2.62)
(cid:12)0.909
((cid:12)1.59)

3.471**
(2.20)
(cid:12)104.3***
((cid:12)3.81)

Prob (cid:10) (cid:14)2 (cid:2) 0.00
Prob (cid:10) F (cid:2) 0.113

ii) Variables are estimated in log terms except for time invariant variables, tariff and RLC, because both variables contain meaningful 0

E 1 values that will be removed by the transformation.

*Statistically signiªcant at the 1 percent level; **Statistically signiªcant at the 5 percent level; ***Statistically signiªcant at the 1 per-

cent level.

suggests that relative labor costs exerted a stronger effect on ASEAN’s P&C exports
to China. This is consistent with the new international division of labor theory for
vertical supply chains that was explained in the previous section.

5. Conclusione

The failure of multilateral liberalization to move forward following the Uruguay
Round has led to the emergence of an increasing number of FTAs in the East Asian

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

region, which have been motivated by the goal of facilitating trade in the region.
The main ªndings in this paper indicate that ACFTA has a stronger effect on ªnal
goods exports than it has had on P&C exports from the ASEAN-5 to China. The dif-
ference in the effects of FTA on these two forms of trade may be explained by the
fact that P&C trade is dominated by MNCs that already enjoy investment incentives
such as duty-free imports from free trade zones in ASEAN-5 and China, as well as
tariff reductions under the WTO-ITA. Così, there was less incentive to utilize
ACFTA tariff concessions, unless MOP was sufªciently large enough to incentivize
ªrms to undergo the costly and necessary ACFTA procedures involved in the veri-
ªcation of the regional content built into their exports to China. The ªndings in this
paper support the conjecture that tariff liberalization under the ACFTA did not exert
a signiªcant effect on P&C exports from ASEAN to China, though it played an im-
portant role in the case of ªnal goods exports. Notably, third-country demand for
the ªnal goods produced in China had a relatively strong effect on ASEAN’s exports
of P&C goods to China.

Nevertheless, since MOP has increased in the last two years following the imple-
mentation of ACFTA, greater utilization of ACFTA’s tariff concessions could be pro-
moted by educating ASEAN-based ªrms on ROO and the steps they would need to
take to comply with ACFTA’s regional content requirements. As suggested by Pitak
(2012), this would require the respective Ministries of Commerce/Trade to conduct
extensive dissemination of information on FTAs to the ªrms in their respective
countries. They would also need to provide FTA consulting services and ROO reso-
lutions for their ªrms, especially in the case of small- and medium-sized enterprises.
Trade associations could also provide their respective members with help in access-
ing ACFTA’s tariff concessions. Use of the ACFTA would also be improved if each
member country were to increase their efforts to monitor and collect data on the uti-
lization of FTAs in their respective countries.

It should also be noted that tariff liberalization is only one factor that has the poten-
tial to enhance exports. Reduced trade costs would prove especially effective, as is
shown by the strength of the distance variable in this study. Further efforts to reduce
trade costs in China will also prove important if ASEAN-5 seeks to improve its ex-
ports to China. Although ACFTA contains provisions that address import costs such
as different trade facilitation measures8 and the inclusion of non-tariff barriers or

8 Article 4 in the Agreement on Trade in Goods of the ACFTA addresses transparency issues.
Allo stesso modo, article 7 states that the agreement abides by the provisions of the WTO disciplines
SU, among others, non-tariff measures, technical barriers to trade, sanitary and
phytosanitary measures, subsidies and countervailing measures, anti-dumping measures,
and intellectual property rights. Article 8 on quantitative restrictions and non-tariff barriers

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

non-tariff measures, these provisions lack speciªcity and hence they are difªcult to
monitor. Così, adopting, monitoring, and setting targets for speciªc trade facilita-
tion measures should be considered as a means of enhancing ASEAN’s exports to
China (Wong and Pellan 2012).

Appendix 1: Summary of key dates and elements in the ACFTA

2002

2004

Signing of Framework Agreement on Comprehensive Economic Cooperation in November 2002, to establish
ASEAN-China Free Trade Agreement (ACFTA).
The Agreements on Trade In Goods and Dispute Settlement Mechanism between ASEAN and China were signed
in November 2004.
Early Harvest Program, with preferential tariffs reduced to zero for more than 500 prodotti, for the ASEAN-6 from
2004–06; and from 2004–10 for CLMV.
Elimination of tariffs for more than 7,000 tradable commodities in the Trade in Goods Agreement.

2005
2007 Agreement on Trade in Services of ACFTA, signed in Cebu, the Philippines, 14 Gennaio 2007.
2009 Agreement on Investment of of ACFTA, signed in Bangkok, 15 agosto 2009.
2010 All parties in ASEAN-6 and China to have eliminated their tariffs for tariff lines in the normal track by 1 Gennaio
2010. Flexibility given to tariffs on some tariff lines (not exceeding 150 lines) to be eliminated by 1 Gennaio 2012.
2012 All parties in ASEAN-6 and China to have eliminated their tariffs for tariff lines in the normal track by 1 Gennaio

2010.

2015 All parties in CLMV countries to have eliminated their tariffs for tariff lines in the normal track by 1 Gennaio 2015,

with ºexibility given to 250 tariff lines that will be eliminated by 2018.

2018 All parties in CLMV countries to have eliminated their tariffs for tariff lines in the normal track by 1 Gennaio 2018.

Fonte: www.asean.org/news/item/asean-china-free-trade-area, avuto accesso 28 Febbraio 2013; and UACT (undated).

Note: CLMV Cambodia, Laos, Myanmar, and Laos.

Appendix 2: Data used in Models 1 E 2

Variable

Variable construction

Export
(Xpnc and Xªn)

• Value of bilateral manufacturing exports in US$ at constant 2005 price. Deºated by the export price index. • Manufacturing products are based on UNCTAD deªnition— (SITC 5 A 8, excluding 667 E 6). • List of P&C products are taken from Athukorala (2010), classiªed by six-digit HS06. Full list are available upon request. • Final goods are Total Exports net of Total P&C. Real gross value of output (GVO) • Output from activities of an industrial nature. • Gross value of output based on UNIDO’s deªnition (http://www.esds.ac.uk/international/support/user_guides/ unido/indstat.asp) deºated by producer price index. Real export of final goods (ExFinal) • China’s total manufacturing exports of ªnal goods to world. This is to proxy for third-country effect. Deºated by China’s export price index. Data source UNComtrade. Prices are taken from the Economist Intelligence Unit (EIU) dati- base. UNIDO. Producer Price Index is taken from EIU database. UNComtrade. Prices are taken from the Economist Intelligence Unit (EIU) database. states that each party undertakes not to maintain any quantitative restrictions at any time unless otherwise permitted under the WTO disciplines. Inoltre, “the Parties shall identify non-tariff barriers (other than quantitative restrictions) for elimination as soon as possible after the entry into force of this Agreement. The time frame for elimination of these non- tariff barriers shall be mutually agreed upon by all Parties. The Parties shall make informa- tion on their respective quantitative restrictions available and accessible upon implemen- tation of this Agreement” (Agreement on Trade in Goods of the Framework Agreement on Comprehensive Economic Co-operation between the Association of Southeast Asian Na- tions and the People’s Republic of China, page 1). Available at: http://fta.mofcom.gov.cn/ dongmeng/annex/xieyi2004en.pdf. Accessed 23 April 2014. 78 Asian Economic Papers l D o w n o a d e d f r o m h t t p : / / d i r e c t . m i t . / e d u a s e p a r t i c e – p d / l f / / / / / 1 3 3 6 3 1 6 8 4 4 2 3 a s e p _ a _ 0 0 2 9 2 p d . f b y g u e s t t o n 0 8 S e p e m b e r 2 0 2 3 Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China Appendix 2: (Continued) Variable Real GDP per capita (GDPci) Distance Variable construction • Real GDP at constant market prices, rebased to 2005 constant prices and translated into US$ using the LCU: $ exchange rate in 2005 per population. • The great-circle or orthodromic distance is the shortest distance between any two points on the surface of a sphere measured along a path on the surface of the sphere (as opposed to going through the sphere’s interior). Language • 1 if the ASEAN-5 country has common language with China (Malaysia and Singapore), 0 if otherwise. Crisis • Dummy variable for two major economic crises in the timeframe of the research (1997–99) E (2007–08). REER • Real effective exchange rate index (2005 (cid:2) 100). • Real effective exchange rate is the nominal effective exchange rate (a measure of the value of a currency against a weighted average of several foreign currencies) divided by a price deºator or index of costs. • CPI-based REER is used because it contains more information about real variables (trade ºows and investment) than other REER indices (Randveer and Rell 2002). Data source EIU database. BACI data set, http://www.cepii.fr/ anglaisgraph/bdd/ baci.htm. BACI data set, http://www.cepii.fr/ anglaisgraph/bdd/ baci.htm. International Monetary Fund, International Financial Statistics. FDI • Total Inward Foreign Direct Investment ºows into ASEAN UNCTAD, UNCTADstat. Relative unit labor cost (RLC) Tariff countries and China (US$ millions).

• Ratio of UNIT labor cost index (China) / Unit labour cost index

(ASEAN countries).

• Both indicators are in USD and rebased to 2005 5 100.
• Trade-weighted tariff constructed based on World Bank’s World

Integrated Trade Solution method:

• (Sum of duties collected / Total imports) (cid:2) 100.
• 1992–2004, Trade weighted tariff rate, most favored nation,

manufactured products (per cento). Data are classiªed using the
Harmonized System of trade at the six- or eight-digit level. Tariff
line data were matched to Standard International Trade
Classiªcation (SITC) revision 3 codes to deªne commodity groups.
Manufactured products are classiªed using SITC revision 3. SITC
(5–8 excluding division 68).

• 2005–2011, trade-weighted average from ACFTA schedule of Tariff
Commitments. The HS codes are matched with the SITC codes.
Manufacturing products are deªned as HS 11 to HS 97 excluding
HS 12 A 24, 27, 47, 75, E 77 A 80 for P&C.

Economist Intelligence Unit
(EIU) database.

World Bank,
http://data.worldbank.org/
indicator/TM.TAX.MANF
.SM.FN.ZS.
ASEAN Secretariat,
World Bank World
Integrated Trade Solution
database.

ACFTA

• ACFTA year dummy from 2005–11.
• The implementation of tariff liberalization schedule commences in

2005.

Riferimenti

Anderson, James. 1979. A Theoretical Foundation for the Gravity Equation. American Economic
Review 69(1):106–116.

Athukorala, Prema-Chandra. 2008. Singapore and Asean in the New Regional Division of
Labor. The Singapore Economic Review 53(03):479–508.

Athukorala, Prema-Chandra. 2010. Production Networks and Trade Patterns in East Asia:
Regionalization or Globalization. ADB Working Paper Series on Regional Economic Integra-
tion No. 56. Manila: Asian Development Bank.

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Athukorala, Prema-Chandra. 2011. Production Networks and Trade Patterns in East Asia:
Regionalization or Globalization. Asian Economic Papers 10(1):65–95.

Athukorala, Prema-Chandra, and Hal Hill. 1998. Foreign Investment in East Asia: A Survey.
Asian-Paciªc Economic Literature 12(2):23–50.

Athukorala, Prema-Chandra, and Jayant Menon. 2010. Global Production Sharing, Trade Pat-
terns, and Determinants of Trade Flows in East Asia. ADB Working Paper Series on Regional
Economic Integration No. 41. Manila: Asian Development Bank.

Athukorala, Prema-Chandra, and Nobuaki Yamashita. 2006. Product Fragmentation and Trade
Integration: East Asia in Global Context. North American Journal of Economics and Finance
17(3):233–256.

Baldwin, Richard, and Daria Taglioni. 2011. Gravity Chains: Estimating Bilateral Trade Flows
When Parts and Components Trade Is Important. Working Paper Series No. 1401. Frankfurt:
European Central Bank.

Blonigen, Bruce A. 2001. In Search of Substitution Between Foreign Production and Exports.
Journal of International Economics 53(1):81–104.

Cairncross, Frances. 1997. The Death of Distance: How the Communication Revolution Will Change
Our Lives. London: Orion Business Books.

Catão, UN. V. Luis. 2007. Why Real Exchange Rates? Finance and Development: A Quarterly Maga-
zine of the IMF 44(3). Available at: http://www.imf.org/external/pubs/ft/fandd/2007/09/
basics.htm. Accessed 28 agosto 2012.

Chaney, Thomas. 2008. Distorted Gravity: The Intensive and Extensive Margins of Interna-
tional Trade. American Economic Review 98(4):1707–1721.

Chirathivat, Suthiphand. 2002. ASEAN-China Free Trade Area: Background, Implications and
Future Development. Journal of Asian Economics 13:671–686.

Deardorff, Alan. 1998. Determinants of Bilateral Trade: Does Gravity Work in a Classical
World? In: Regionalization of the World Economy, edited by Jeffrey A. Frankel, pag. 7–22. Chicago,
IL: University of Chicago Press.

Dunning, John H. 1988. The Eclectic Paradigm of International Production: A Restatement and
Some Possible Extensions. Journal of International Business Studies 19(1):1–31.

Edwards, Lawrence, and Stephen Golub. 2004. South Africa’s International Cost Competitive-
ness and Productivity in Manufacturing. World Development 32(8):1323–1339.

Grunwald, Joseph, and Kenneth Flamm. 1985. The Global Factory: Foreign Assembly in Interna-
tional Trade. Washington, DC: The Brookings Institution.

Helpman, Gene, and Paul Krugman. 1986. Market Structure and Foreign Trade. Cambridge, MA:
CON Premere.

Hiratsuka, Daisue, Kazunobu Hayakawa, Kohei Shino, and Seiya Sukegawa. 2009. Maximizing
Beneªts from FTAs in ASEAN. Chapter 11. In: Deepening East Asian Economic Integration, edited
by J. Corbett and S. Umezaki. ERIA Research Project Report No. 2008-1, pag. 407–545. Jakarta:
ERIA.

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Holst, David R., and John Weiss. 2004. ASEAN and China: Export Rivals or Partners in
Regional Growth? The World Economy 27(8):1255–1274.

Hummels, David, Jun Ishii, and Kei-Mu Yi. 2001. The Nature and Growth of Vertical Special-
ization in World Trade. Journal of International Economics 54(1):75–96.

Jones, Ronald. W. 2000. Globalization and the Theory of Input Trade. Cambridge, MA: CON Premere.

Kawai, Masahiro, and Ganeshan Wignaraja. 2009. Asian FTAs: Trends and Challenges. Asian
Development Bank Institute (ADBI) Working Paper No. 144. Tokyo: Asian Development Bank
Institute.

Kepaptsoglou, Konstantinos, Matthew G. Karlaftis, and Dimitros Tsamboulas. 2010. The Grav-
ity Model Speciªcation for Modelling International Trade Flows and Free Trade Agreement
Effects: A 10-Year Review of Empirical Studies. The Open Economics Journal 3(1):1–13.

Lawless, Martina, and Karl Whelan. 2008. A Note on Trade Costs and Distance. Central Bank &
Financial Services Authority of Ireland (CBFSAI) Research Technical PapersNo. 7/RT/07.
Dublin: CBFSAI.

Lee, Hiro, and Dominique van der Mensbrugghe. 2007. Regional Integration, Sectoral Adjust-
ments and Natural Groupings in East Asia. Discussion Paper No. 2007-E-008 Osaka School of
International Public Policy. Osaka: Osaka University.

Linnemann, Hans. 1966. An Econometric Study of International Trade Flows. Amsterdam:
North-Holland.

Liu, Xiaming, Pamela Siler, Chengqi Wang, and Yingqi Wei. 2000. Productivity Spillovers from
Foreign Direct Investment: Evidence from UK Industrial Level Panel Data. Journal of Interna-
tional Business Studies 31(3):407–425.

Melitz, Marc J. 2003. The Impact of Trade on Intra-Industry Reallocations and Aggregate
Industry Productivity. Econometrica 71(6):1695–1725.

Narjoko, Dionisius A. 2011. International Production Networks and Trade Liberalization:
A Literature Review. In: Fighting Irrelevance: The Role of Regional Trade Agreements in Interna-
tional Production Networks in Asia. New York: UNESCAP.

Ozawa, Terutomo. 1992. Foreign Direct Investment and Economic Development. Transnational
Corporation 1(1):27–54.

Park, Donghyun, Innwon Park, and Gemma E. B. Estrada. 2009. Prospects for ASEAN-China
Free Trade Area: A Qualitative Analysis. China & World Economy 17(4):14–120.

Pellan, Marie Isabelle, and Man Heong Wong. 2013. Trade Facilitation in ASEAN and
ASEAN(cid:4)1 FTAs: An Analysis of Provisions and Progress. Journal of World Trade 47(2):243–279.

Pitak Udomwichaiwat. 2012. Best Practices on FTA Promotion Policies: The Case of Thailand.
Paper presented at APEC Workshop on Increasing FTA Utilization by SMEs. 7 agosto, Tokyo,
Japan.

Randveer, Martti, and Mari Rell. 2002. The Relationship between Competitiveness and Real
Exchange Rate in Estonia. Bank of Estonia Research Paper. Talinn: Bank of Estonia.

Roberts, Benjamin. 2004. A Gravity Study of the Proposed China-ASEAN Free Trade Area. IL
International Trade Journal 18(4):335–353.

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3

Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China

Sheng, Yu, Hsiao Chink Tang, and Xinpeng Xu. 2012. The Impact of ACFTA on People’s Re-
public of China-ASEAN Trade: Estimates Based on an extended Gravity Model for Component
Trade, ADB Working Paper Series on Regional Economic Integration No. 99. Manila: Asian
Development Bank.

Thangavelu, Shandre M., and Christopher Findlay. 2011. The Impact of Free Trade Agreements
on Foreign Direct Investment in the Asia-Paciªc Region. In: ASEAN FTAs and Global Value
Chains in East Asia. ERIA Research Project Report 2010–29, edited by Christopher Findlay,
pag. 112–131. Jakarta: ERIA.

Thorbecke, Willem, and Nimesh Salike. 2011. Understanding Foreign Direct Investment in East
Asia. ADBI Working Papers No. 290. Tokyo: Asian Development Bank Institute.

Tinbergen, Jan. 1962. Shaping the World Economy; Suggestions for an International Economic Policy.
New York: The Twentieth Century Fund.

Toh, Mun Heng, and Vasudevan Gayathri. 2004. Impact of Regional Trade Liberalization on
Emerging Economies: The Case of Vietnam. ASEAN Economic Bulletin 21(2):167–182.

Tongzon, Jose. 2005. ASEAN-China Free Trade Area: A Bane or Boon for ASEAN Countries?
The World Economy 28(2):191–210.

United Nations Economic and Social Commission for Asia and the Paciªc (UNESCAP). 2011.
Fighting Irrelevance: The Role of Regional Trade Agreements in International Production Networks in
Asia. New York: UNESCAP.

Universal Access to Competitiveness and Trade (UACT). (undated). ASEAN-China Free Trade
Agreement: A Primer. Available at: www.uactphilippines.org/index.php?option(cid:2)com
_content. Accessed 28 Febbraio 2013.

Wang, Yunzhu, and Sarah Y. Tong. 2010. China-ASEAN FTA: Changes in ASEAN’s Perspective
on China. East Asian Institute Background Brief, No. 58. Available at: www.eai.nus.edu.sg/
Vol2No2_WangYuzhu&SarahYTong.pdf. Accessed 28 Febbraio 2013.

Wong, John, and Sarah Chan. 2002. China’s Emergence as a Global Manufacturing Centre:
Implications for ASEAN. Asia Paciªc Business Review 9(1):79–94.

Wong, Man Heong, and Marie I. Pellan. 2012. Trade Facilitation: The Way Forward for ASEAN
and Its Partners. Economic Research Institute for ASEAN and East Asia (ERIA) Policy Brief
No. 2012-04. Jakarta: ERIA.

Yamashita, Nobuaki, and Archunan Kohpaiboon. 2011. Trade in Supply Chains and China
Development Implications. Chapter 3. In: ASEAN 1 FTAs and Global Value Chains, edited by
Christopher Findalay. ERIA Research Report 2010, No. 29. Jakarta: ERIA.

Yeoh, Emile Kok-Kheng, and Shuat Mei Ooi. 2007. China-ASEAN Free Trade Area: Prospects
and Challenges for Malaysia. Paper presented at The International Conference Made in China
vs. Made by Chinese: Global Identities of Chinese Businesses, 19–20 March, Collingwood
Università, Durham University, United Kingdom.

Asian Economic Papers

D
o
w
N
o
UN
D
e
D

F
R
o
M
H

T
T

:
/
/

D
io
R
e
C
T
.

io
T
.

e
D
tu
UN
S
e
P
UN
R
T
io
C
e
–
P
D

F
/

1
3
3
6
3
1
6
8
4
4
2
3
UN
S
e
P
_
UN
_
0
0
2
9
2
P
D

B
sì
G
tu
e
S
T

o
N
0
8
S
e
P
e
M
B
e
R
2
0
2
3 Re-examining the Impact of ACFTA on ASEAN’s Exports of Manufactured Goods to China image

Scarica il pdf